MUMBAI, Sept 23 (Reuters) - Indian government bond
yields surged for a second straight week, as the hawkish stance
of the U.S. Federal Reserve fuelled expectations of the Reserve
Bank of India keeping pace with larger and longer rate hikes.
The benchmark Indian 10-year government bond yield
ended at 7.3926%, after closing at 7.3118% on
Thursday. The yield ended at its highest level in two months,
rising 12 basis points this week, its biggest such move since
the week ended May 6. It had risen 10 bps last week.
A 50 bps rate hike in the next policy meeting would ensure
"RBI does not lag the Fed's pace by much," ICICI Securities
Primary Dealership said in a note. "In the same vein, a terminal
rate of 6.5% would maintain a semblance of interest rate
differential and provide some cushion to rupee."
The Fed raised interest rate by 75 basis points earlier this
week - its third such increase - and Chairman Jerome Powell said
central bank officials were "strongly resolved" to bring down
The U.S. Treasury yield curve inversion deepened further,
amid widespread expectations that the Fed will to continue its
hawkish stance toward hiking rates, as it battles persistently
high inflation. The benchmark 10-year U.S. yield
jumped to 3.7760%, its highest in over 11 years.
The Reserve Bank of India's policy decision is due on Sept.
30, and a slim majority of economists in a Reuters poll are
expecting half a percentage point hike, while some others see a
smaller 35 bps rise.
Twenty-six of the 51 economists in a Reuters poll predicted
the RBI to go for a 50 basis-point hike, taking the repo rate to
5.90%. Another 20 predicted a 35 bps increase. The remaining
five pencilled in more modest increases, ranging from 20 to 30
The RBI has already hiked repo rate by 140 bps since May,
including two back-to-back 50 bps moves in June and August to
control inflation, which has stayed above the central bank's
tolerance level for eight straight months.
Earlier this week, Deutsche Bank said it expects inflation
to rise to a five-month high of 7.4% in September, from 7% in
(Reporting by Dharamraj Lalit Dhutia; Editing by Dhanya Ann